Capital markets: NYSE-Euronext jumps into Gaap

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By:
Peter Koh
Published on:

NYSE-Euronext is capitalizing on regulatory convergence to show issuers some of the benefits that it had hoped its transatlantic merger might be capable of.

The exchange operator is benefiting from a decision by the European Commission in April to accept accounts prepared according to US Gaap accounting rules, without having to reconcile them under IFRS, a costly exercise.

The EC also plans to recognize the accounts of firms from Canada and Korea by 2011 and is considering extending recognition to the new Chinese accounting rules.

NYSE-Euronext has been quick to exploit the decision, launching a new streamlined process to reduce the complexity US issuers face when cross-listing in Europe. The exchange has also made the process cheaper by charging an admission fee of €25,000.

Companies can now be cross-listed either simultaneously at the time of their IPOs or either with or without a capital increase at any point after they are listed, using just one prospectus and set of documentation.

Euronext Paris has already added three US companies for trading, including Anheuser-Busch, the maker of Budweiser beer; tobacco company Philip Morris, and Brookfield asset management, which have all joined the Paris exchange since March this year.

NYSE-Euronext believes the ability to offer issuers easy access to both the US and European markets will make it attractive not only for US companies with strategic ambitions in Europe but also help the exchange compete for IPOs from emerging markets.

"We believe that the ability to easily and cheaply list simultaneously in both our US and European platforms will be interesting for companies from emerging markets seeking to raise capital," says Martine Charbonnier, head of European listings at NYSE-Euronext. "We expect quite strong demand from companies going public and have already received quite a lot of interest."

The initiative is important for NYSE-Euronext because its lucrative listing business has lost ground to rivals, particularly the London Stock Exchange, in the competition to attract the IPOs of non-domestic companies. Business at the NYSE has suffered from the costly burden of Sarbanes-Oxley, which has put off some international issuers and caused some mainly European companies with long-standing dual listings to either cancel their US listings altogether or move them to the less-heavily regulated OTC market. Such large European companies as Air France-KLM, Roche, Adidas, Rhodia, Akzo Nobel and British Gas, are among those to have left the big board in the last year for International OTCQX, a segment of the Pink Sheets, an OTC trading system. The Paris market has been aggressively trying to promote itself as an alternative to London and this year won small listings from Chinese companies including China Corn Oil and real estate company Huacheng.

NYSE-Euronext also hopes to gain from a similar mutual recognition regime that will involve the SEC accepting the documents of companies reporting using the IFRS standard, without having to restate their accounts in US Gaap, from 2009. The SEC even suggested that it might accept statements filed using IFRS from US companies.